ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The current account will equal zero
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The financial account will move to a deficit
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The financial account will equal zero
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The current account will move to a deficit
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The current account and financial account will be equal
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Detailed explanation-1: -The current account includes foreign transactions that are not associated with a future financial obligation, such as imports and exports. Therefore, when net exports increase, the current account balance increases.
Detailed explanation-2: -The balance of payments summarises the economic transactions of an economy with the rest of the world. These transactions include exports and imports of goods, services and financial assets, along with transfer payments (like foreign aid).
Detailed explanation-3: -Statement 3 is correct: The Balance of Payments (BoP) includes both the current account and capital account, in the capital account there is the nation’s imports and exports of capital and foreign aid.
Detailed explanation-4: -Balance of trade (BoT) is the difference that is obtained from the export and import of goods. Balance of payments (BoP) is the difference between the inflow and outflow of foreign exchange. Transactions related to goods are included in BoT. Transactions related to transfers, goods, and services are included in BoP.